Rupee falls to weakest since mid-March fearing impact of Trump's tariff on exports

Indian rupee

The rupee slipped to over four-month low at open and has extended weakness on July 30, sliding down to 87.44 per dollar or 0.7 percent, after US President Trump hinted that India could face tariffs between 20-25 percent amid continued negotiations for a trade deal between the two countries.

The Rupee had opened at 87.12 against the US dollar, and has continued to slip further in the session. According to Bloomberg data, the last time the currency breached the 87-mark at the open was on March 13, 2025.

Responding to a question on whether the United States would impose tariffs between 20-25 percent on India, Trump said, "Yeah, I think so. They (India) are my friend and he (Prime Minister Narendra Modi) is my friend," adding that the trade deal had not been finalised. Read More

The tariff rate mentioned by Trump is higher than what has been offered to UK, EU and Japan, but lower than what some of the Asian peers have negotiated with the US. The weakness is likely due to worries over the potential impact of the tariff rate on exports, though Reuters reported that there has likely been an intervention by the Reserve Bank of India that has helped limit losses.

In the near-term, RBI is expected to ease the volatility, Reuters quoted a forex salesperson with a large foreign bank. "...expect RBI to continue smoothening volatility while chances of firm intervention to lift the currency are low due to the uncertain environment."

India and the US have held several rounds of talks but haven’t sealed the deal. Trump’s reciprocal tariffs will kick in from August 1, when the tariff pause ends. They are looking to reach a first tranche of a Bilateral Trade Agreement (BTA) by September or October. A US team is expected in India for the next round of talks in the middle of August.

"India has charged basically more tariffs than almost any other country....over the years...you just can't do that," Trump said.

Brent crude added to the pressure on currency by rising to a five-week high of $72.54 a barrel in early trade.

"As Trump gave an ultimatum to Russia oil prices ticked up to more than 3 percent on Wednesday and continued to remain up at $ 71.76 per barrel as potential supply shortages came into focus after the shortened deadline for ending the war in Ukraine," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

Bhansali was referring to Trump on July 28 setting a 10-12 day deadline for Russia to make progress toward ending the Ukraine war or face consequences. Trump has threatened sanctions on both Russia and buyers of its exports unless progress is made.

The rupee is likely to trade in a broader range of 86.45–87.25, Jateen Trivedi, VP Research Analyst - Commodity and Currency,  LKP Securities said.